USDJPY is set up to continue its gains for up until at least mid 2025. This is based on the following:
Interest rates:
US Real Interest Rate: 5.5% (Cash Rate) - 3.3% (Inflation Rate) = 2.2%
Japan Real Interest Rate: 0.1% (Cash Rate) - 2.8% (Inflation Rate) = -2.7% (Negative Rate)
As US rates are higher than Japan's, more money is flowing out of the JPY and into the USD. Based on this, we can expect USDJPY to continue moving higher. It's important to know that Japan's inflation rate has been climbing since September 2021. As long as Japan's inflation rate remains high and the interest rate differential is wide, this pair will continue to see gains for at least up until Mid 2025.
Bank of Japan's intervention:
The BOJ has historically intervened in it's currency to inflate or deflate it's value on multiple occasions:
Current scenario:
Since the most recent BOJ intervention, USDJPY climbed back above the 160.00 price level. There is speculation among traders that the BOJ may take advantage of the low liquidity during the 4th of July or tomorrow's US economic data to make another intervention in the Yen. There is a possibility that prices could decline by 5-7%. This is nothing to worry about as this is only a temporary fix by the BOJ. The wide interest rate differential will move prices back up again to create fresh highs. The BOJ does not usually announce when it will intervene in the FX market and its difficult to speculate at which price level they will intervene at.
My trade plan:
I am looking to continue buying this pair. Even if tomorrows Non Farm Payrolls come out negative for the USD, I will look for prices to restabilise where I can place more buy orders.
Keep your eyes peeled guys. The next intervention may be silent and deadly so ensure you use appropriate risk management. Once the intervention is complete, we can start aggressively buying this pair again.
- Wide interest rate differential
- Bank of Japan artificially inflating the value of the Yen
Interest rates:
US Real Interest Rate: 5.5% (Cash Rate) - 3.3% (Inflation Rate) = 2.2%
Japan Real Interest Rate: 0.1% (Cash Rate) - 2.8% (Inflation Rate) = -2.7% (Negative Rate)
As US rates are higher than Japan's, more money is flowing out of the JPY and into the USD. Based on this, we can expect USDJPY to continue moving higher. It's important to know that Japan's inflation rate has been climbing since September 2021. As long as Japan's inflation rate remains high and the interest rate differential is wide, this pair will continue to see gains for at least up until Mid 2025.
Bank of Japan's intervention:
The BOJ has historically intervened in it's currency to inflate or deflate it's value on multiple occasions:
- BOJ Intervention of 1988 - Asian Financial Crisis
- BOJ Intervention of 2003 - Yen's strength was affecting Japanese exports
- BOJ Intervention of 2010 - BOJ coordinated with the G7 to stabilise the Yen
- BOJ Intervention of 2022 - The first artificial currency inflation since 1988
- BOJ Intervention of 2024 - BOJ buys up Yen to protect it from significant loses against the USD
Current scenario:
Since the most recent BOJ intervention, USDJPY climbed back above the 160.00 price level. There is speculation among traders that the BOJ may take advantage of the low liquidity during the 4th of July or tomorrow's US economic data to make another intervention in the Yen. There is a possibility that prices could decline by 5-7%. This is nothing to worry about as this is only a temporary fix by the BOJ. The wide interest rate differential will move prices back up again to create fresh highs. The BOJ does not usually announce when it will intervene in the FX market and its difficult to speculate at which price level they will intervene at.
My trade plan:
I am looking to continue buying this pair. Even if tomorrows Non Farm Payrolls come out negative for the USD, I will look for prices to restabilise where I can place more buy orders.
Keep your eyes peeled guys. The next intervention may be silent and deadly so ensure you use appropriate risk management. Once the intervention is complete, we can start aggressively buying this pair again.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.